Book Partial Profit - Vijaya Bank

Vijaya Bank was recommended earlier in our Low Price Scrip column in Issue No 20 dated September 26, 2010. The stock was suggested for a ‘buy’ at the price of `83.45 on the strength of three main reasons, viz. good dividend yield of 3 per cent, adjusted price-to-book value at 1.40x as against the industry average of 2x, and the capital adequacy ratio (Basel II) at 14.74 per cent which was well above the stipulated level of 9 per cent. The plan of the bank to reach a business level of `1,26,000 added to the confidence level behind recommending the stock. At present, the stock is quoting at `109.75, thus providing a gain of 31.51 per cent from the price it was recommended at.

The bank posted a net profit of `144.30 crore for Q2FY11 as against net profit of `108.42 crore for the corresponding quarter last year, registering a 33.08 per cent growth. The aggregate business of the bank was `1,02,473 crore, comprising `62,688 crore of deposits and `39,805 crore in advances. The priority sector advances of the bank worked out to `14,521 crore. Within priority advances the agricultural loans were to the tune of `4,622 crore while loans to the MSME sector clocked a 28.26 per cent growth to reach `6,272 crore. The bank plans to add additional 100 branches and 250 additional ATMs which will take the total mark to 1250 and 675 respectively will improve the presence of the bank. Therefore, our suggestion to investors is to book partial profit in the counter of around 50 per cent and stay invested in the rest for better returns.